By Susan Bell Negative market sentiment will continue to weigh on venture capitalist 3I Gro...
By Susan Bell
Negative market sentiment will continue to weigh on venture capitalist 3I Group's share price but the depressed prices for start-ups should prove a buying boon for the group which will shine through in 18 months, according to analysts at Dresdner Kleinwort Wasserstein.
"Given the current environment 2001/2002 should see strong investment as asset prices fall and this bodes well for the long-term valuation," analyst Bill Barnard said in a report.
Barnard has maintained a buy but has cut the fair value figure to £15.50 and dropped the current net asset value to 850p.
"Overall, we estimate that the unrealised value in 3I's portfolio has fallen by £1.2bn (203p) since 30 September," Barnard said.
"The bulk of the hit has been taken by some of 3i's recent, larger and higher-profile successes (such as Bookham Technology, Telecity and Biosearch) although other quoted stocks, and in particular those on the secondary markets have also been hit hard."
Although this is causing short-term pain for 3I, these poor market conditions are laying the foundation for the growth of future investments, Barnard argued.
"As more difficult market conditions clarify the competitive environment in both the venture capital and private equity markets, so those with the more robust business models will benefit.
"As many new entrants to the venture capital market over the last 18 months withdraw (eg, incubators and corporates) so the stronger and more established venture capitalists remain.
Indeed, the established players may well be able to cherry-pick assets and people from weaker players."